How do you feel about Congress enacting a sales tax on all internet sales?

Apr 30, 2013 3:34 PM

You may have read or heard about it already, but congress is likely going to be passing a federal sales tax bill when they return from recess. Whether you are a merchant, an affiliate marketer or a customer, it will affect everyone. Do you favor or oppose such a sales tax and why?

Top Answers

Oppose, and not for the reason you think. I don't know if it is still taught (quite apparently not), but I still remember "no taxation without representation". Proponents always try to use some weird definition of 'fair', claiming that B&M stores have to pay it, so it is 'fair' to make an entity from another state pay it too. Well, why does the local brick and mortar pay it? Because they use the roads, the water, the fire and police, etc etc, all the 'infrastructure' that our taxes are supposed to cover. Merchant XYZ in New York does NOT use the infrastructure in North Dakota, so I keep waiting for someone to explain to me how it is 'fair' to expect them to pay for the roads, water, fire, police, etc there. And before someone tries to say "they ship their product, therefore they do so use the roads"...are you seriously trying to suggest UPS/FedEx/etc don't pay that? They are the ones who actually use the roads, and they do in fact already pay the taxes.

Are you talking about the Internet sales tax bill? That's not a Federal sales tax. It just gives states the ability to levy taxes on internet sales to its residents. A Federal sales tax would be a much different animal.

It was my understanding that sales tax was for local use. It's to fund local municipal improvements. How are they going to allocate those funds? I am opposed to Federalizing sales tax as a de facto new tax, as there is not currently (to my knowledge) a Federal sales tax. Furthermore, it is likely to be mind-numbingly complicated, as sales tax laws vary from state to state. For example, in Texas, food other than "convenience foods" are not subject to sales tax. This can be complicated. For example, when I buy a scoop of ice cream at Marble Slab Creamery, it is taxed, but when I buy a quart it is not. A slice of cake is taxable, a whole cake is not. Texas sales tax is high partly because of this exemption. Meanwhile in neighboring New Mexico, sales tax is lower, but food is taxable. So if I order food from New Mexico to be delivered to Texas, it is taxed and at whose rate? What if the company is officed in New York, but ships my box of chile verde from NM to TX?

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It was my understanding that sales tax was for local use. It's to fund local municipal improvements. How are they going to allocate those funds? I am opposed to Federalizing sales tax as a de facto new tax, as there is not currently (to my knowledge) a Federal sales tax. Furthermore, it is likely to be mind-numbingly complicated, as sales tax laws vary from state to state. For example, in Texas, food other than "convenience foods" are not subject to sales tax. This can be complicated. For example, when I buy a scoop of ice cream at Marble Slab Creamery, it is taxed, but when I buy a quart it is not. A slice of cake is taxable, a whole cake is not. Texas sales tax is high partly because of this exemption. Meanwhile in neighboring New Mexico, sales tax is lower, but food is taxable. So if I order food from New Mexico to be delivered to Texas, it is taxed and at whose rate? What if the company is officed in New York, but ships my box of chile verde from NM to TX?

Oppose, and not for the reason you think. I don't know if it is still taught (quite apparently not), but I still remember "no taxation without representation". Proponents always try to use some weird definition of 'fair', claiming that B&M stores have to pay it, so it is 'fair' to make an entity from another state pay it too. Well, why does the local brick and mortar pay it? Because they use the roads, the water, the fire and police, etc etc, all the 'infrastructure' that our taxes are supposed to cover. Merchant XYZ in New York does NOT use the infrastructure in North Dakota, so I keep waiting for someone to explain to me how it is 'fair' to expect them to pay for the roads, water, fire, police, etc there. And before someone tries to say "they ship their product, therefore they do so use the roads"...are you seriously trying to suggest UPS/FedEx/etc don't pay that? They are the ones who actually use the roads, and they do in fact already pay the taxes.

Are you talking about the Internet sales tax bill? That's not a Federal sales tax. It just gives states the ability to levy taxes on internet sales to its residents. A Federal sales tax would be a much different animal.

I wouldn't like more taxes but if they did then I'd just have to take it into account when figuring if it were cheaper to order on the internet or local B&M.
Currently if things are about even I purchase B&M to give them the business adding a sales tax on internet sales will only drive more of my purchases local. Of course many things I order online I cannot find local for those a tax will just cost me more :(

@90mcg. Yes, there is a pending bill that grants states the authority to impose sales tax on internet sales. But there is also a bill in the hopper that is being developed through committee that would replace individual state sales tax with a federal sales tax on internet sales. Amazon, although they are opposed to individual state internet sales tax where a nexus exists between a merchant and an affiliate that has a presence in that state, Amazon supports a federal internet sales tax that could/may supercede a state by state nightmare for merchants. http://mikeyounglaw.com/amazon-internet-sales-tax/. This is more what I am referring to by my question.

If a company has a B&M store or a distribution center (as an example) in your state, you should pay taxes on everything you order. They are using tax payer dollars to support the infrastructure that their business depends on (roads, street lights, police, etc). Now if you order from a site that does not have any presense in your state, what do they need to pay taxes on? I already paid for the delivery of the goods which goes to the parcel delivery company who pays taxes on that charge.

I'm fine with it. Tax law needs to catch up to the new internet sales machine eventually. Especially as more and more people are buying stuff online from out-of-state companies instead of at local shops, sales tax revenue has fallen dramatically and it shows. The thing about the bill is that it just moves the burden of reporting/collecting the tax from the individual (use tax, yes, you're supposed to pay it on untaxed purchases already), where it never gets collected/reported, to the business, where it will. It'll be a little rocky at first as companies figure out the best way to calculate the tax they're now expected to collect, but in the long run it's a good thing.
All the whiners will just have to get used to gasp paying the taxes they're supposed to be paying already, but don't.

The real problem with the probable law is the reporting for small businesses. A small business must collect and distribute the appropriate tax. There are over 6500 different sales tax entities (states, cities, counties, etc.). There is no possible way that an individual can do this. I am one of them, and as soon as my sales reach a certain level, I will be forced to hire an accountant or lawyer to do this. That immediately cuts my profit to a level that it may not be worthwhile to be a small business. This means that I must artificially limit my possible income. What a terrible enticement to grow a small business. There will now be tons of people selling under a million dollars worth of goods and services and no possibility of growing.

Amazon would get exactly what they want, a multitude of tiny competitors that would have no way of really competing. (The law is championed by Amazon and being fought by eBay).

I oppose it. Sales tax is for items I purchase from retailers that have a physical presence in my state.

Lobbyists should be loaded into a canon and shot at the sun. They ruin our economy and our government. I can't wrap my head around why it's legal. Unfortunately, the people that can vote to do away with them are the very people benefiting from their existence.

Honestly, I don't think we should have Congress or a Senate anymore either. All they do is screw up everything that is good. With our modern technology and communications, we don't need to pay someone for the rest of their life to vote on things in a way that only benefit them for a period of 2 or 4 years. We the people can place our votes and waste money on our own.

@moondrake: " For example, when I buy a scoop of ice cream at Marble Slab Creamery, it is taxed, but when I buy a quart it is not. A slice of cake is taxable, a whole cake is not. Texas sales tax is high partly because of this exemption."
The reason for this is you're actually being charged tax on the service of cutting and serving the ice cream. Not the product itself. The cut piece of cake vs the whole cake. someone had to cut it. Someone had to actually scoop the ice cream.
It's the same in grocery. the deli sliced meat, taxed. the sliced meat in containers by the package bacon. not taxed.

State sales taxes are charged at different rates from state to state. What state would Amazon pay? What about ebay sales, you expect some 2nd income ebay seller to keep up with ever changing sales tax?

@caffeine_dude: They're required to collect whatever sales tax is appropriate for the taxing district in which the buyer lives. My county, for instance, has a half-cent sales tax that the county immediately south of me does not. Tax-calculation software that can sort out all this carp by zip code is available, but I suspect the sheer amount of paperwork for businesses that do more than $1million but, say, less than $10million in sales will be overwhelming. As I understand it, the current bill excludes the $1mil sellers but there's an attempt to amend the exclusionary floor to $10mil. Amazon, attempting to kill off small businesses, supports the former; eBay, attempting to assist its mid-size sellers, supports the latter. Either way, buyers will get kick in the pants.

@stile99: I have been remiss in my research (I've pretty well assumed it's a lost cause for buyers and have therefore paid the issue little attention), and I want to thank you for the use-of-infrastructure argument that I hadn't thought of.

@triplebud: Florida sales-tax statutes differentiate "food," which is generally not taxable here, from "food for immediate consumption," which generally is taxable. Under statute, neither packaged bacon nor sliced deli meat is taxable, as both are considered "food." On the other hand, I'm still trying to figure out from the statute itself if a half-quart container of potato salad, sold sealed and without eating utensils, is food or food for immediate consumption. Next time we shop, I'll check the receipt and ask the cashier.

At any rate, in Florda the sales tax on ice cream in a quarter container vs. in a cone has nothing to do with the service involved in making the cone; it's all about the "immediate consumption" aspect. The definitions occasionally get seriously heated (translation: lobbists get paid a big bundle) as manufacturers try to keep their products untaxed.

@moondrake: The amount of tax to be collected by online companies will be based on the home address/ZIP of the buyer.

At least in the four or five states I've lived in as an adult, the sales tax in any state is either a State tax that goes to the State for distribution or a State tax plus a local tax, divvied up at some point and by some entity between the State and the locality.

For instance, my county has a half-cent sales tax added for 20 years by local vote and dedicated to funding certain specific local projects. (There's also some sort of cap on certain items, such as cars, so that buyers here don't go one county south to make such purchases.)

I think all the sales taxes collected are remitted to the State, which then remits the local taxes collected back to my county, but I'm not sure of that mechanism.

@morriea: Do you not know what a database is? This is EXACTLY the kind of thing that you could easily build a database for to integrate with your e-commerce site.
Or do you expect me to believe that you do over a million in sales per year and you can't afford something like http://www.zip2tax.com/shopping/z2t_services.asp#PageSection3 and a simple database creation? Heck, I'm sure if you wanted to spend the time doing so, you could compile a list of sales taxes by zip code all on your own, spending nothing but time on it.
No, you do not need to have accountants and/or lawyers on retainer to have up-to-date tax info per zip code.

Calm the heck down. I hate sales tax as much as anyone, but realistically:

1. Congress isn't going to be taxing anyone with this bill, it's simply requiring sales tax to be collected for the locality in which the buyer lives.
2. It's not ALL INTERNET SALES as you proclaim, it only applies to people who have a sales tax where they live. Not every state has a sales tax.
3. Like it or not, the rules have to be set at the federal level because there are too many different policies now.
4. If you live in a state with a sales tax, that state already requires you to pay the tax on your own; This will make it simpler for the buyer in that IF they want to stay within the law, they no longer have the hassle of adding up every non-taxed transaction and filling out the appropriate state forms. Now, are you admitting to cheating on your state taxes...
5. This proposed legislation doesn't apply to ALL ONLINE MERCHANTS, from what I've read only ones that have more than $1 million in annual sales

6. Additionally, from what I've read, the merchant will only required to collect and remit sales tax to the individual states that provide FREE software for calculating and collecting the state and local sales tax. It won't be as burdensome on businesses as many fear. If a state doesn't offer the free software to the merchant, then that merchant will not be required (under the proposed law) to collect tax for residents of that state. The state will then process the local sales tax funds on behalf of the cities/counties that have a sales tax, so the merchant still will only make payments to one agency per state.

@magic cave: So I am required to pay taxes for online purchases and I may or may not..
With the change: The seller would need to send taxes to, potentially all 50 states, not to mention each states required paper work that would accompany this revenue. Seems like a small business killer to me.

This sucks, but it was going to happen sooner or later. Governments never deal with less, they always must have more (money, power, land, everything). There was too much money floating around the internet for them not to stick their paws in there.

One snarky question for the supporters of a retailer in Arizona (for example) collecting Georgia sales tax: do you think that this "new" money will result in lower taxes here? Or are the politicians here going to take the money and use it to buy more votes?

Against. Congress got its yearly raise again, which oddly enough they let them vote on.(Since 1990, congressional pay has increased from $98,400 to $154,700 in 2003) The average member of the house of representatives makes $174,000 and we somehow have a problem with taxes? They need to nerf the pay for all those elected officials before we start worrying about how many pennies joe blow will be out of because he lives in Minnesota and decided to purchase something online from somewhere else.
If they paid those crooks minimum wage and somehow banned lobbyists from "donating" coughcough (i mean bribing) to their "campaign" funds we might actually have a shot at a balanced government. As long as we continue to line their pockets they will continue to vote themselves raises and create loopholes to help the financiers that got them there...

@triplebud: No, at Marble Slab they have to scoop the ice cream and "cut-in" your choice of flavorings before packing it into the quart container. It's the exact same process as when you buy a scoop. It's not a service tax, it has to to with whether the food is considered a "convenience" food or a food that you are going to eat at home. Sodas are taxable in any sized container. Milk is not taxable in the gallon, but the little single serves are.

People, they are NOT, let me repeat since so many people will only listen to the right wing talking points, Congress is NOT enacting a new or increased tax.

All they are doing is requiring that the vendor collect the sales tax that YOU are already, by law, required to pay. It's just that most of us don't bother to collect all our receipts and pay the sales tax on items that we weren't charged it for when it comes tax day.

It's worth repeating..... This is NOT a new or increased tax. You are ALREADY required to pay it.

That said, Congress does need to enact a small tax on all high speed financial trades. A tiny tax, 0.03% on these trades, which most of us have nothing to do with, would bring in $352B over the next 10 years and also have the side effect of making some of these companies think twice about some of their risky stop/limit orders. We saw what one tweet from a hacked AP account can cause.

@kamikazeken: Good summary. On a personal level, I don't want to see this. I likes my tax-free internet shopping!

Realistically, things have changed so much since the days of mail-order catalogs that it's time that the law caught up with the times.

My understanding: This isn't a new tax. This is just giving states a chance to collect the monies that they are owed.

In some states, if the seller does not collect and remit the sales tax, then the buyer is supposed to pay with their income tax. There is a line "use tax" that one uses to pay your state all the taxes you owe. I suspect that this line is used rarely, if ever. ;-)

I like this approach better that what some states have tried to do, which is get a database of all purchases that a retailer (Amazon) has shipped to the state so that they can collect said tax retroactively.

Even with states providing free software, it's still going to be a nightmare. There are at least 45 states with sales tax.

@stile99: You do realize it's the customer that pays the sales tax, NOT the business, right?

The business simply collects it and forwards it onto the state. The state then splits it with the city/municipality, if they have a separate tax.

So, using your own argument, it is right for these businesses to collect the tax, which the customer is already required to pay by law, just on their own, because it's the customer that DOES use the local infrastructure, schools, etc, etc, etc.

And it's such a simple process for the businesses to pay it. I collect sales tax in 23 states and it takes me less than 30 minutes once a quarter, so only 2 hours a year, to pay them all. A federal repository would be even better. That way the business pays it once and the fed forwards it to the states, the same way they do with income & payroll taxes.

@magic cave: And @triplebud: "At any rate, in Florda the sales tax on ice cream in a quarter container vs. in a cone has nothing to do with the service involved in making the cone; it's all about the "immediate consumption" aspect."

It is this way in Texas as well. I don't know where this 'tax the service' thing came from, but trust me, it comes as a complete surprise to everyone in Texas. Basically, the intent is "we don't want to tax groceries, but we want to tax fast food". So say you go to CostCo and buy a pizza. Did you get it from the freezer? No tax. Did you get it from the food counter? Tax.

@stryker4526: Can you please take the time to estimate the cost and time involved in handling the paperwork from and processing remittance checks to each of the taxing districts in which the customers of a $9million business live?

To make things easy, what about a flat tax (say 2 or 3 %) that would go to the home state of the buyer, to be dispersed from there to local entities. Simple to add to checkout. None to the feds, unless your state is exempt. Might be to easy for the government though.

@mschauber: A couple of points of curiosity, please. You say your sales tax collection takes only two hours per year. Does that include completing any required paperwork for each of the approximately 9600 taxing districts, or do the separate 23 states just tell you how much to pony up? (And why does your company deal with only 23 states?) Does that "two hours per year" include bookkeeping costs of cutting checks each quarter? Is your operation run and handled solely by you, or do you have additional back office staff?

@stryker4526: "Heck, I'm sure if you wanted to spend the time doing so, you could compile a list of sales taxes by zip code all on your own, spending nothing but time on it.
No, you do not need to have accountants and/or lawyers on retainer to have up-to-date tax info per zip code."

There are approximately 9600 taxing districts in the US. Compiling a list of each of them would take a significant amount of time, and if you're running a business, your time is money.

It seems pretty evident that you're not real familiar with running a business.

@spicyaprons: Whomever writes for that website is full of hot air and nothing else. The idea of a federal sales tax is as old as this country and hasn't been seen yet despite having been proposed is every legislative session for decades. The only change we MAY see is that online merchants will be required to collect the sales tax we are already supposed to pay and transmit it to the states.

@magic cave: There's one time paperwork for each state when you apply for a sales tax ID. Some states have annual renewals, but that's either a couple of clicks on their website or signing a sheet a paper and mailing it in. You do not apply to collect tax for each municipality. NH is the only state that has no state or local sales taxes. Collection is easy and payment is easy, you don't separate out local and state, the state does that. I'm required to collect sales tax in any state I do business in. It's such an easy process that I decided to get resale certs for a few extra states even though I haven't had clients there yet. I'm small enough that I do my own bookkeeping. QuickBooks makes it very simple. Setup your tax rates once and you're good to go. I check once a year for any changes. I rarely cut a check, I use EFT or bank bill pay via QB 95% of the time. Paper checks are a waste of time and money. BTW: Most states let you keep a small % of what you collect for your trouble.

I say give unto Caesar that which is Caesar's. The free lunch of tax free internet stuff had to end. I'm not saying how they are going to do it is the best, but it was bound to happen some time. States/munis have to collect money to hire teachers, police officers, have libraries, etc. And with millions of $ being spent online and not at B&M stores, state tax revenue has decreased dramatically. As far as I see it, there are 2 options:1) Cut sales tax entirely and move fully to an income tax (which is what our Fed government does) or 2) figure out a way to tax sales on the internet. They went with number 2.

For all the people concerned about the 9600 taxing jurisdictions (which is a legit concern), it will be handled by software. Tax collection etc is handled by software already for a large portion of businesses. Really, this will just be an extension of that. Added cost, probably some.

Perhaps instead of complaining about this, we should try to come up with a better solution.

@stile99: About your initial comment. It would be valid if business's payed sales tax. They don't, the consumer does. You pay sales tax to fund those roads and services. Business's are there because there is demand. They get taxed as well for using those services, but if this is a discussion about sales tax, that is strictly on the consumer.

@magic cave: That's exactly how wrong information is disseminated and fears get stoked. You don't pay each municipality separately. When you file with the state you list how much was collected for each jurisdiction and then pay the state. The state then separates the payments out to the munis, in whatever method they use. Part of running a business is doing the work required to maintain the business. Whether a small business like I have, a medium size like it sounds like you are talking about, or a large corporation. For people to just complain because they have to do some work they don't like, is ridiculous. SMBs can bitch and moan all they want about too much regulation, too much paperwork, too much oversight, etc. The fact is there isn't nearly enough. And the fact that you've gotten away with something for so many years, doesn't mean you shouldn't be doing what's right. Without taxes there would be no roads, no telephones and no internet!!!!! But plenty of West, TX's.

@magic cave: Your ignorance of how stuff like this actually works (you pay the state, once, who handles remittance to each of those taxing districts, NOT file paperwork and cut a check [a paper check? what is this, 1995?]) doesn't give you a whole lot of credibility when you try to say that I have no idea what's involved with running a business. Your complete ignorance of how simple it would be to incorporate this information into a database that could be integrated with an e-commerce site doesn't help, either.
Keep on keepin' on that chicken though, I'm sure it's worked out real well for ya.

The Professional Marketing Association (PMA) offers some great (accurate) information about the various tax issues affecting the internet. Those who may have a serious concern regarding online sales tax laws might find them helpful. My intention in posing the question was not to be political but simply to see how others in our community might feel about internet sales tax collection. ;)

Opposed . . .
Most state laws are written in such a way that any sale or trade, barter, etc. by a person living in that state, that person is required to pay sales tax on that transaction. Because states are not bringing in enough money, this law has been proposed requiring all retailers to collect the tax that is due the individual states. Just think of the amount of paperwork required to keep in compliance with all 50 states (read "added expense").
Just like it won't do any good to add more (anti) gun laws, this is taking away our freedoms.

What will be the effect? The one that worries me the most is that it will be far more difficult to start online businesses resulting in less choice for the consumer. On top of that add the added expense of the extra paperwork that will get passed along.

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